Industry Committee on March 26th, 2015

[Annick Papillon, NDP, Québec, QC]

Generally speaking, how do these voluntary communications take place, without going into all of the details?

[Rob Martin]

It's a bit of a complicated question, but we can try to provide you some of the data, if any of that's going on. But you have to keep in mind that there is now anti-money-laundering and anti-terrorist financing legislation that, to my understanding, requires that this sort of information be shared with FINTRAC and not to the police forces directly. There are rules around that. When I joined the credit union system many, many years ago, there was much more informal communication between credit union front-line staff and local RCMP and police. That was cut off with the anti-money-laundering and anti-terrorist financing legislation.

I don't think our office is tracking that, but we can look into it for you.

[Annick Papillon, NDP, Québec, QC]

Very well, thank you.

My question is addressed to representatives of the Insurance Bureau of Canada. You talked about providing information if you suspect that a crime is afoot, such as elder abuse or something like that. If it is a simple civil matter, if an insurance company is looking for information to study a file, what prevents you from providing more specific information?

[Richard Dubin]

I'm not sure I understand the question.

You're mentioning that it's just a brief civil matter of some kind...? Perhaps you could be more specific.

[Annick Papillon, NDP, Québec, QC]

If we are talking about a civil matter, if an insurance company is seeking information on a file, what would prevent you from providing the information? Can you answer me on that?

[Richard Dubin]

Here's how it actually works. They're not going to look further if they don't have...as a reasonable prudent person with reasonable grounds to believe that a possible fraud exists. So unless those grounds are there, they're not going to be contacting us or another insurer. We wouldn't get involved.

Last year alone we trained 1,300 people across the country, including police officers and insurance companies. We teach them PIPEDA. We teach them that you need reasonable grounds to believe that as a prudent person you have concerns that you need to investigate further. If they find that, then they go to their supervisor in most cases and they get a confirmation to share that information or obtain further information.

If they don't see those grounds, they're not going further. They won't come to us. They won't contact the other insurer. What they will do as a matter of practice is that based on the accident that's called in, they'll ask us to look at our database just to see if there were any previous accidents. They can get that information as well from AutoPlus and Carfax.

[Annick Papillon, NDP, Québec, QC]

I would also like to know if you have an ethics code, and what guidelines there are for the disclosure of personal information for life and health insurance companies, more specifically.

[Randy Bundus]

We have an agreement among insurers that they will conduct themselves according to certain ethics. That's set out in a claims agreement among themselves. As my colleague Mr. Dubin said, because insurers are subject to bad faith claims, if they act inappropriately in handling a claim, that in itself has gone a long way to dealing with their acting properly in handling these sorts of matters.

[The Chair, Conservative, David Sweet]

Did you have more to add?

[Randy Bundus]

Yes: specifically with regard to a code of conduct, apart from what's in the claims agreement, no, we do not have one in our industry.

[The Chair, Conservative, David Sweet]

Thank you very much.

We will move on to Mr. Warawa, for eight minutes.

[Mark Warawa, Conservative, Langley, BC]

Thank you, Chair.

Thank you to the witnesses.

I'd first like to provide a brief history of how we are where we are, and then ask for general comment from each of you on whether you support Bill S-4 going ahead or not going ahead. Then I will have some specific questions.

PIPEDA was passed in 2000. It came into force in 2001 to 2004, I believe. We can make changes to legislation in Parliament by legislation or by regulation. If it is by regulation, you regulate changes to existing legislation. It is also very common, and often required, that legislation be reviewed every five years. PIPEDA was reviewed in 2006-07, and some of you were involved in making recommendations as witnesses or by presenting submissions. The responsibility of the government is to listen to those and try to create a balance. Any legislative change is not going to get support from everyone for everything, because there are opposing ideas. But in general, I think, our government has reached that balance, and most of the witnesses from whom we have heard want Bill S-4 to go ahead.

We are about eight weeks away from this Parliament ending, and you may be the last group of witnesses that we hear from before we start dealing with the bill and working as a committee to see if we have any amendments. If there are amendments to this bill, given that there are only eight weeks left, it would be just about impossible, in my opinion, for Bill S-4 to move ahead, because it would then have to go back to the Senate.

I think I have heard general support for the bill going ahead.

Mr. Bundus, I think you said you don't want to stop it with these amendments; you want it to move forward.

I think, sir, you noted that changes could be made by regulation, which they can, if there are additional changes that need to be made.

Perhaps you could make a quick comment: do you support Bill S-4 moving ahead as it is now, or do you not support it moving ahead?

Maybe I could start with the Credit Union Central of Canada.

[Marc-André Pigeon]

Certainly.

We would be supportive of it going ahead, I think, for some of the reasons we outlined in our opening remarks. Maybe just to underline a couple of other points, we would also support the idea that this is taking us a step forward in terms of harmonizing with some of the provincial rules, and that's a good thing. We might ask that the committee, in its report, flag some of the concerns that were addressed here that could be taken up subsequently in regulation or given some detail on in another review later on. But we would be generally supportive of it going ahead, yes.

[Randy Bundus]

We would support it going ahead as well, as it achieves better balance than what we had before. We've learned, over the past number of years, of the weaknesses of the existing legislation, and this bill addresses a number of them. In five years we'll look at this again and maybe get it perfect.

[Dr. Éloïse Gratton]

I would also support the bill going ahead.

[Frank Zinatelli]

We would also support the bill. We've heard, even today, some suggestions that are useful—for example, the one about extending fraud to crime and so on. But I think the bill is a very good one and should proceed as it is.

[Mark Warawa, Conservative, Langley, BC]

Okay. Thank you.

To the credit union, you mentioned the $100,000 penalty for non-compliance. As with in the Criminal Code, if there's a crime, a criminal offence, there are maximums. Rarely are there minimums, but in some cases there are. In this case, it's a maximum that could be fined, a penalty, and it would be up to the commissioner to decide whether or not that is appropriate. So the commissioner has the discretion to provide an appropriate penalty, but $100,000 would be the maximum.

Do you have a similar understanding?

[Rob Martin]

My understanding is that the amount is up to $100,000. Our concern is that if the maximum amount would be imposed on a small credit union, as you said, with say $10 million in assets, that would have very significant consequences, compared to what might happen if a bank faced the same penalty, which would be quite small, I guess, for a large competitor of ours.

That's what we want considered. Of course, there has to be some relationship between the severity of the breach or the issue, and the fine, but there should also be some recognition that institutions of different sizes have different capacities to deal with that.

[Marc-André Pigeon]

Just to add to that, there's always a concern when you're dealing with a regulator. They may not be too sensitive to that size differential, despite the fact that they have some latitude. That's our basic concern. We want to make sure that there's some signal that they should take that into consideration, because that could really sink a small credit union that provides services to communities that need them. I think that's important.

[Mark Warawa, Conservative, Langley, BC]

Yes, I've heard that a lot.

Apparently the Insurance Bureau represents 90% of insurers. Is the Insurance Corporation of British Columbia one of the members?

[Randy Bundus]

The Insurance Corporation of British Columbia, as a government-owned insurer, is not one of our members. We have privately owned insurers as our members.

[Mark Warawa, Conservative, Langley, BC]

The principle of insurance is that we all share in the expense of a loss. When everybody puts money into the bucket, if some small group of people experience a loss that year, we all share in that loss. The principles are that you do not gain, you do not benefit, other than being as best as possible being put back to the position before the loss, but you don't gain.

You're saying people who have not experienced a loss are gaining from that at everybody's expense. It makes everybody's insurance much more expensive when you have corruption. Most of the people who are in the investigative portion of your business, in my understanding, have police backgrounds, a large percentage of them, so they understand how the whole system works.

You also have houses involved. You've given examples of cars, but you could have fraudulent burning down of a house, or a loss of personal property, or even a car being burned because it's going to cost too much to fix the transmission, so now they can get $2,000 for the car that really was worthless.

There are many different ways. For houses, is this also a problem, where you can be tracking these losses to make sure that we're not all paying for fraudulent claims?

[Richard Dubin]

One area that jumps out is organized auto theft. This has significant impact. We pulled $8.8 million worth of stolen vehicles at the ports of Montreal and Halifax last year alone. We're well over $55 million since we started this in 2009 at those two ports.

The point I'm getting at is that it's just another form of organized insurance crime, as you've mentioned, that has a very significant impact on the premiums that everybody else is going to end up paying for.

[The Chair, Conservative, David Sweet]

Ms. Nash, for eight minutes.

[Peggy Nash, NDP, Parkdale—High Park, ON]

Thank you, Mr. Chair.

Thank you to all the witnesses for your testimony.

I must say, before I ask my questions, that because PIPEDA was passed in 2006, the review was to have been completed by 2011. So while I hear my colleagues commenting that we can't improve this bill because we're running out of time, frankly it reminds me of one of my three sons saying, “I don't have time to clean my room right now or I'm going to be late for school” when he had all weekend to clean his room.

The government has had four years. This review should have been completed four years ago, and the fact we're getting these amendments now at the industry committee, after they have already gone through the Senate, is frankly a bit of brinksmanship. So I would encourage the witnesses to keep an open mind that while, of course, we want to modernize this law, and we want to address the concerns people have, we also want to have a good law, and we should take the opportunity to try to address the concerns that witnesses, yourselves and others, have brought to us.

One of the concerns that has been raised—I'd like to put this to all of the witnesses—was that this bill does not comply with the Supreme Court Spencer decision, and therefore we need to update our legislation, and other jurisdictions will need to address this as well. I'd like to get your thoughts on that. Do any of you have concerns that this doesn't adequately protect privacy in light of the Spencer decision, or is it something that you feel your legal counsel says is not going to impact your interpretation of how this law would be viewed?

Who would like to start? Mr. Bundus.